Universal Music Wins Approval to Buy EMI Recorded Music

Antitrust approval for the transaction comes almost a year after Vivendi SA's Universal Music Group agreed to buy London-based EMI Groups’s recorded unit from Citigroup Inc. for 1.2 billion pounds ($1.95 billion), effectively ending more than 80 years of business at EMI. Photographer: Chris Ratcliffe/Bloomberg

Sept. 21 (Bloomberg) -- Vivendi SA’s Universal Music Group
won approval from the U.S. Federal Trade Commission for its
purchase of the recorded-music business of EMI Group, best known
as the record label of the Beatles.

The FTC closed its review of the transaction, which allows
the merger to go forward, following approval earlier today from
European competition authorities after Universal Music agreed to
sell about one-third of EMI assets to cut the combined group’s
market share.

“Based on its review of company documents, discussions
with industry participants and empirical analysis, commission
staff did not find sufficient evidence of head-to-head
competition to conclude that the combination of Universal and
EMI would substantially lessen competition,” Richard Feinstein,
director of the FTC’s bureau of competition, said in a
statement.

Antitrust approval for the transaction comes almost a year
after Universal Music agreed to buy London-based EMI’s recorded
unit from Citigroup Inc. for 1.2 billion pounds ($1.95 billion),
effectively ending more than 80 years of business at EMI.

Major Companies

The takeover cuts the number of major record companies to
three, as the industry faces challenges including illegal
downloading and fewer CD sales.

“We have been working behind the scenes for this moment
for about nine months, and we are very happy,” Universal Music
Chief Executive Officer Lucian Grainge said in a phone
interview.

With control over labels such as Virgin Records and
Capitol, the next steps will be “about how we integrate, our
ambition for the future and our intention to invest and rebuild
with entrepreneurs, creative talent and music professionals,”
Grainge said. The company is planning a “significant increase
in investment,” particularly in Capitol records, he said.

Grainge also said he’s committed to achieving savings of
100 million pounds ($163 million) by integrating the two
companies.

Among divestments, Universal Music will sell the Parlophone
music label, home to Coldplay and David Bowie, as well as Black
Sabbath’s record company Sanctuary, and the Chrysalis label,
home to Depeche Mode, the European Commission said in a
statement today. Universal will also avoid favorable terms for
any new digital music deals in Europe for 10 years.

“The very significant commitments proposed by Universal
will ensure that competition in the music industry is
preserved,” EU Competition Commissioner Joaquin Almunia said in
a statement.

Opposition Voice

Public Knowledge, a Washington-based public interest group,
opposed the transaction, calling on the FTC to block the merger
entirely or demand stronger concessions appropriate for the U.S.
market, such as ordering Universal Music to sell Capitol Records
or the Island Def Jam Music Group.

“It is incredible that the FTC has not taken any action
whatsoever to protect consumers and competition in the nascent
digital music market,” said Jodie Griffin, staff attorney at
Public Knowledge. “By failing to act to block this merger or
even impose even one condition beyond that imposed by the
European Commission, the FTC is allowing UMG to acquire
unprecedented market power and amass a dominant collection of
copyright holdings.”

Citigroup sold EMI’s publishing division in a separate
transaction for $2.2 billion to a Sony Corp.-led group. That
purchase was cleared by EU regulators in June.